The American Dream or The American Delusion?

http://real.wharton.upenn.edu/~wongg/research/The American Dream.pdf

"Is the American Dream a delusion? In the 2003 Fannie Mae National Survey, 74 percent
of the respondents believe that homeownership provides the feeling of “owning something of
your very own”, alluding to what economists call “the pride of ownership”. 81 percent of
homeowners report homeownership being a very positive experience, while only 31% of renters
report renting being so.

This paper conducts an in-depth analysis of the well-being, time use, family life and civic
participation of homeowners. By using a wide array of well-being indicators as well as
information on housing consumption, neighborhood characteristics and demographics, I am able
to examine the well-being of homeowners from different angles while controlling for
confounding factors to isolate the effect of homeownership.

The findings in this paper are striking. Homeowners are happier on average only on an
unadjusted basis. Once household income, housing quality and health are controlled for, they are
no happier than renters. What’s more, they report to derive more pain from their house and
home. This positive pain gap remains stable and robust when health, neighborhood
characteristics and financial stress are controlled for.

As for the most frequently cited channels of a positive impact by homeownership, namely
self-esteem, stress, health and family life, again there is very little supporting evidence in my
data. In fact, less healthy women might have self-selected as homeowners. Homeowners are less
stressed on an unadjusted basis only. Whether I look at the time use patterns, affective
experience or satisfaction related to social or family lives, my analysis finds no support for
happier homeowners. On the other hand, homeowners spend less time on active leisure activities
or with friends, which have been documented as some of the most positive affective experiences.
Two tentative conclusions can be reached from my findings on private benefits of
homeownership. First, the American Dream notion of homeownership might at least be partly
fueled by observed differences in the levels of well-being by homeownership on an unadjusted
basis. Second, once we explore the actual time allocation, affect and satisfaction related to
specific activities and social interactions, the intuitive link between homeownership and wellbeing
breaks down. Insofar as homeowners self-select into homeownership, one might expect
them to choose a state that yields more satisfaction. This implies the results from the crosssectional
comparisons in this paper can be viewed as upper bounds of private benefits of
homeownership.

As for the external benefits of homeownership, my analysis offers little support for the
notion that homeowners are better citizens. However, I do find suggestive evidence that
homeowners view their neighborhood in a more positive way if there is a larger share of
homeowners in their own SES group. This is consistent with the theory that social capital is
created when homeowners interact and coordinate – presumably homeowners of similar SES
backgrounds either interact more or create more social capital for a given amount of interaction.
These results help reconcile the mixed results in the social capital literature; they suggest that
interaction among homeowners, rather than homeownership in itself, is more likely to be
responsible for the positive social outcomes."